The Matrimony of Trust and Structure in OISD projects

The Matrimony of Trust and Structure in OISD projects

According to “The Role of Trust in Outsourced IS Development Projects” (Communications of the ACM, Feb. 1999/Vol. 42, No.2), trust builds confidence-whether it be on an interpersonal or interorganizational level. Motives, perceptions, and behaviors dictate the relationship between client and vendor in any outsourced IS development project.

In outsourcing, participants frequently have no prior relationships with each other-each having a short-term, project-centered view. Each party is reluctant to give up complete project control for fear of the self-serving goals of the other, resulting in hindered performance with fingers being pointed in every direction. A psychological, as well as a formal, written contract, is usually involved in interorganizational relationships. Compliance with the written contract is generally cut-and-dry, whereas the other is marked by unspoken rules and expectations.

Balance between trust and structure is essential for project success. Excessive trust without structure can lead to the inability to deal with unexpected problems, while excessive structure with little trust can lead to time wasted on constant meetings and reporting.

Four types of trust were noted in the article: Calculus-based, where structural controls and penalty clauses exist, along with an expected long-term relationship; Knowledge-based, where a “courtship” and prior joint projects between client and vendor exists; Identification-based, where emphasis is on shared goals and team building; and Performance-based, where periodic demos/pilots are given, along with joint celebration of system developments.

OISD projects continue through “virtuous and vicious cycles.” The virtuous cycle involves trust, proper structuring, and positive performance, while the vicious cycle involves distrust, poor structuring, and hindered performance. Jumping from the virtuous cycle to the vicious cycle can be influenced by changes in personnel, poor project management and performance problems. To get out of trouble, the organization can reduce or add necessary structures, emphasize positive events and de-emphasize the negative, change the project manager, or decrease excessive top-management involvement.

OISD is a good management option, although problems continue to exist with the client-vendor relationship. Basically, the players involved have to trust each other, with balanced structure being part of the game in order to score high on performance.